Microsoft Applications

Microsoft Licensing

Different methods to license Microsoft products

There are 7 ways to license Microsoft products. The most basic way is to buy the Microsoft suite bundled with the computer and laptop that has been purchased. This is also often the cheapest way to buy Microsoft because the OEM manufacturer is buying in such large quantities they can buy it at the cheapest prices. Alternatively you can purchase single editions of Microsoft products from a retailer like Best Buy. For the normal home user these are the most practical way to buy the product but it has drawbacks for Companies.

• If a laptop/desktop or server is obsolete, lost or broken you cannot transfer the license to a new machine
• If new versions of the Microsoft product are released you have to purchase a new license.
• If you are buying OEM licenses over time in an organization the users end up on different versions of the same product and those on the older versions are not able to open files of the new versions.
• The OEM’s version of the Microsoft suite is slightly customized for each computer manufacturer and IT support can have trouble managing different versions.
• The bundled versions of Microsoft products do not always have the same applications. Most will include the basic Work, Excel and Outlook. Others include, Powerpoint, Access and others may also include Microsoft products that the company does not use and support.
• You have no rights to re-image disks for quicker set up nor do you have rights to down-grade to a lower version to ensure company wide consistency.

For these reasons and others from 2004 WNA gradually switched from OEM versions to Volume Licensing Agreement such as Open Value with Software Assurance. The Open Value means that you buy and load a single version of a Microsoft product and you have rights to download it on as many machines as you which. You then periodically tell Microsoft how many machines the product has been loaded on to and they charge you a license fee for each one. The Software Assurance means that when a new version of the software is released you are allowed to load the new version at no extra cost. The other benefits of these agreements are:

• The license can be transferred to another machine at no extra cost
• There is a consistent version of each Microsoft product loaded in all machines
• Disk-imaging is permitted which enables new computers to be set up with all the programs and applications almost instantaneously
• The cost of the Microsoft product can be spread over three years.
• It can be possible for the employee to load the Microsoft products on a home computer at no charge for business use if the employee has a licensed version on a company-owned machine.

Open Value Agreements last for three years. At the end of that time you can choose to renew or not. If you chose not to renew you would still be entitled to use the product but it could never be upgraded. The only option then would be to buy OEM versions with all the disadvantages listed above. The other characteristic of Open Value is that although Microsoft allows you to true-up your license quantity as you use more licenses it is not possible to true-down if over the life of the agreement there is a reduction in the number of PC’s running Microsoft. This is because once you have licensed the software it belongs to the company for their use. At the end of the three year agreement the licenses can be renewed to reflect the lower license count if necessary. The Open Value is most appropriate for companies that have between 5 and 250 computers under license

Reviewing the Open Value Agreement

When reviewing the Open Value agreement in November 2009 for the next twelve months it became apparent that when the next agreement came in to affect WNA would have been looking at a three year renewal cost of $240,000. (three payments of $80,000). A number of things were driving this extra cost.

• Laptop, desktops and servers bought for Polar included OEM Microsoft licenses would now be included on the next agreement
• The MS SQL server database purchased by Chelmsford on cap-ex CE-28-07 had a three year service agreement that was expiring at the beginning of 2010. The licenses needed renewal
• Over the past three years we had bought laptops, servers and desktops without the cost of Microsoft licenses. The average cost of each laptop we had bought was $400-$500 cheaper than they would otherwise be but now we were seeing that cost being reflected in the higher renewal costs.
• Until we installed desktop asset management network software we relied on estimating Microsoft office products. When the program was run to extract each user’s desktop applications we discovered that there was more licenses than we were estimating. This means In previous years therefore we underpaid for our licenses.

Now that we do have more licenses the Open Value Agreement was no longer suitable. The threshold where moving to an Enterprise Agreement is better value is 250+ machines. According to Microsoft

The next step was determine what licenses should be included under agreement and negotiate the best pricing contract with a Microsoft Added Value Reseller. Licenses are covered under an Enterprise Agreement There a large number of different licenses covered under the agreement. They include

• Microsoft Office (Word, Excel, Outlook, Powerpoint, Access, etc)>250 users
• Other Microsoft Applications such as Visio, Project, etc <50 users
• Microsoft Windows Operating System > 250 users
• Windows CAL (Client Access Licenses) Allows users to connect to the network > 250 users
• Exchange Server 1 license
• Exchange Server CALs (Allows users to connect to email)
• Microsoft Server < 50 servers
• Microsoft SQL database 2 servers
• Sharepoint CALS (Intranet) >250 users

Ways of reducing the cost of the EA Agreement

• Sixty percent of the cost of the EA Agreement is the cost of running the Microsoft Office suite of products (Word, Excel etc). It is very difficult to see how we could reduce the cost of this element other than removing Office from a handful of machines that do not need it.
• Examine whether users still need their copies of other Microsoft Office products such as Visio, Project, etc. In some case users purchased copies of these programs only to open attachments sent to them by others. These could be replaced by free ‘viewer’ applications that can open but not edit a document.
• Move from Windows Server Licenses to Data Center Licenses. This would mean that licenses would be calculated based on the number of processors in a computer not the number of servers. This would make sense only under certain circumstances. Currently we have 41 servers. This means we need 41 licenses. Each server as 2 processors. If we moved to Data Center Licensing we would need 82 licenses. Obviously this makes no sense. However, suppose we moved to a virtual environment where we consolidated the 41 servers to 3 virtual servers with 2 processors each. Under this example we would reduce the licenses from 41 to 6. Therefore, if we were to move to a virtual environment we would only put a few windows server licenses under the agreement and convert them to Data Center Licenses in the annual True up of licenses.

Other benefits of an EA Agreement

• Two free consulting days for help with Exchange Server/Intranet/ Office deployment
• Twenty free Microsoft Training days vouchers
• E-Learning module for Microsoft Applications
• 2 Free Telephone support incidents plus unlimited web support
• Free Technet subscription (knowledge base and forum, etc)
• Up to 20 Free Microsoft licenses for Desktops in a designated Training Facility

Negotiating with Microsoft Reseller

Our Microsoft Reseller is PC Connection. They have negotiated a deal with Microsoft. The initial quote was $239,000 and was reduced to $189,000 on negotiation. In the first year this will be 4 payments of $16,000 or $64,000 in the first year rising slightly in years two and three. This is $19k higher than was estimated in the IT Budget and it reflects the higher Microsoft license counts than estimated.